What does MAPE measure?

What does MAPE measure?

• A. The average of the signed percentage error
• B. The maximum error percentage
• C. The size of the error in percentage terms
• D. The size of the forecast error in units

Answer: (C)

MAPE stands for mean absolute percentage error. It measures how large the forecast errors are, expressed as a percentage of the actual values. The crucial part is the absolute value, which prevents positive and negative errors from canceling out, then averaging those percentage errors to show the typical size of the forecast error in percent. This makes the measure easy to interpret and comparable across items of different scales. It’s not the average of signed percentage errors because that could hide the true magnitude of mis forecasts due to cancellation. It isn’t the maximum error percentage, since MAPE reflects average performance over all periods, not the single worst case. It isn’t the size of the forecast error in units, because MAPE expresses errors as percentages of actuals, not raw units.

MAPE stands for mean absolute percentage error. It measures how large the forecast errors are, expressed as a percentage of the actual values. The crucial part is the absolute value, which prevents positive and negative errors from canceling out, then averaging those percentage errors to show the typical size of the forecast error in percent. This makes the measure easy to interpret and comparable across items of different scales.

It’s not the average of signed percentage errors because that could hide the true magnitude of mis forecasts due to cancellation. It isn’t the maximum error percentage, since MAPE reflects average performance over all periods, not the single worst case. It isn’t the size of the forecast error in units, because MAPE expresses errors as percentages of actuals, not raw units.